Thursday, November 26, 2009

The Real Thanksgiving Lesson - Economics version

In 1620 Plymouth Plantation was founded with a system of communal property rights. Food and supplies were held in common and then distributed based on equality and need as determined by Plantation officials. People received the same rations whether or not they contributed to producing the food, and residents were forbidden from producing their own food. Governor William Bradford, in his 1647 history, Of Plymouth Plantation, wrote that this system was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. The problem was that young men, that were most able and fit for labour, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense. Because of the poor incentives, little food was produced.

Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.

This change, Bradford wrote, had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been. Giving people economic incentives changed their behavior. Once the new system of property rights was in place, the women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability.

Once the Pilgrims in the Plymouth Plantation abandoned their communal economic system and adopted one with greater individual property rights, they never again faced the starvation and food shortages of the first three years. It was only after allowing greater property rights that they could feast without worrying that famine was just around the corner.

We are direct beneficiaries of the economics lesson the pilgrims learned in 1623. Today we have a much better developed and well-defined set of property rights. Our economic system offers incentives for us—in the form of prices and profits—to coordinate our individual behavior for the mutual benefit of all; even those we may not personally know.

By the spring of 1623, the population of Plymouth can have been no larger than 150. But the colony was still barely able to feed itself, and little cargo was returning for the investors in England. On one occasion newcomers found that there was no bread at all, only fish or a piece of lobster and water. “So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery,” Bradford wrote in his key passage on property.

Having tried what Bradford called the “common course and condition”—the communal stewardship of the land demanded of them by their investors—Bradford reports that the community was afflicted by an unwillingness to work, by confusion and discontent, by a loss of mutual respect, and by a prevailing sense of slavery and injustice. And this among “godly and sober men.” In short, the experiment was a failure that was endangering the health of the colony.

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So the land they worked was converted into private property, which brought “very good success.” The colonists immediately became responsible for their own actions (and those of their immediate families), not for the actions of the whole community. Bradford also suggests in his history that more than land was privatized.

The system became self-policing. Knowing that the fruits of his labor would benefit his own family and dependents, the head of each household was given an incentive to work harder. He could know that his additional efforts would help specific people who depended on him. In short, the division of property established a proportion or “ratio” between act and consequence. Human action is deprived of rationality without it, and work will decline sharply as a result.

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Bradford felt that, in retrospect, his real-life experience of building a new society at Plymouth had confirmed Bodin’s judgment. Property in Plymouth was further privatized in the years ahead. The housing and later the cattle were assigned to separate families, and provision was made for the inheritance of wealth. The colony flourished. Plymouth Colony was absorbed into the Commonwealth of Massachusetts, and in the prosperous years that lay ahead, nothing more was heard of “the common course and condition.”

Long before Karl Marx was even born, the Pilgrims had discovered and experimented with what could only be described as socialism. And what happened? It didn't work!"

"It never has worked! "What Bradford and his community found was that the most creative and industrious people had no incentive to work any harder than anyone else, unless they could utilize the power of personal motivation! But while most of the rest of the world has been experimenting with socialism for well over a hundred years – trying to refine it, perfect it, and re-invent it – the Pilgrims decided early on to scrap it permanently. What Bradford wrote about this social experiment should be in every schoolchild's history lesson. If it were, we might prevent much needless suffering in the future. 'The experience that we had in this common course and condition, tried sundry years...that by taking away property, and bringing community into a common wealth, would make them happy and flourishing – as if they were wiser than God,' Bradford wrote.

"'For this community [so far as it was] was found to breed much confusion and discontent, and retard much employment that would have been to their benefit and comfort. For young men that were most able and fit for labor and service did repine that they should spend their time and strength to work for other men's wives and children without any recompense ... that was thought injustice.' Why should you work for other people when you can't work for yourself? What's the point? Do you hear what he was saying, ladies and gentlemen? The Pilgrims found that people could not be expected to do their best work without incentive. So what did Bradford's community try next? They unharnessed the power of good old free enterprise by invoking the undergirding capitalistic principle of private property.

"Every family was assigned its own plot of land to work and permitted to market its own crops and products. And what was the result? 'This had very good success,' wrote Bradford, 'for it made all hands industrious, so as much more corn was planted than otherwise would have been.'

About Me

Native-Mainer, trapped in Massachusetts, happily-married (18 years and counting) father of four. I've got opinions. Why do you care? You probably don't. But I'm going to put some of 'em out here anyway. I've been working as a computer engineer in Massachusetts and southern NH for the last 20 years, but I'm rarely if ever going to post on any topics related to that. A lot of what I write about will be the Boston Red Sox, as well as the Patriots and Celtics. I started studying Tang Soo Do after watching my kids all do it, and I may have the occasional comment on that. And I will be commenting on political issues that interest me. Which tend to be more national in scope than local.
And whatever else strikes me.